TIPS FOR HOW TO PAY FOR OFF-CAMPUS HOUSING WITH STUDENT LOANS
For many college students, the idea of spending two years or more living in a cramped dorm room with a stranger is simply not appealing. Dormitory living, when available, comes with many advantages, but it isn’t for everyone.
Some colleges offer apartment-style residence halls, which can be an attractive alternative for those who want the convenience of living on campus but relish the idea of having more space. Other college students know from the start that they want to live in an off-campus apartment or another type of rental property alone or with other students.
PAYING FOR OFF-CAMPUS HOUSING WITH FINANCIAL AID
If your college does not require you to live on campus, you may be excited at the prospect of living in an apartment. However, if you are relying on financial aid — like many students do — you may be wondering how to pay for off-campus housing with student loans. The good news is, student loans and some other types of financial aid can be used for off-campus housing. It’s important to understand the rules and processes for using student aid this way.
In general, you can use financial aid, including student loans, to pay for the entire cost of attending college. Your school’s financial aid office will calculate a cost of attendance and student budget that includes tuition and fees, room and board, books, supplies, other equipment, transportation, and miscellaneous costs. You can legally use student loans and other aid to pay for the cost of your off-campus apartment, up to the amount calculated by your college.
Q&A ABOUT USING STUDENT AID TO PAY FOR OFF-CAMPUS HOUSING
Q: How can I apply for student loans that pay for off-campus housing?
A: If you want to apply for any type of financial aid, including federal loans and grants, you will need to complete the Free Application for Federal Student Aid (FAFSA). FAFSA opens in October each year for the following academic year. Completing a FAFSA beginning in October 2021 will determine eligibility for financial aid for the 2022-2023 academic year. Your college’s financial aid office can help you understand the steps involved in the process.
Q: Can my lender disburse loan proceeds to me so I can pay my rent?
A: No. Student loan proceeds are distributed to your college. Your school will then apply loans and other aid to the cost of attendance including tuition and fees and, if you choose on-campus housing, for room and board. Any amount remaining will be refunded within two weeks. If you want to use student loans to pay your rent, you will need to budget to pay at least the first month’s rent because you will not have yet received the loan proceeds.
Q: Can my 529 plan pay for off-campus housing?
A: Yes. Housing while in college is a qualified educational expense. However, there are certain restrictions. You must be enrolled at least half time. In addition, you can only withdraw an amount up to the maximum cost of room and board as calculated by your college when it prepared your financial aid award information if you want to ensure there are no unpleasant tax surprises.
EXPLORE YOUR OPTIONS FOR PAYING FOR OFF-CAMPUS LIVING
While you can legally use student loan proceeds and other financial aid to pay for an apartment off campus, it’s a good idea to identify and consider all potential options for paying rent before committing to one.
Student loans will eventually need to be repaid. If there are other resources available to you — or if you can limit the amount of loans you take to what is necessary rather than using the maximum amount possible — you will be effectively increasing your post-graduation balance sheet because you won’t have the same debt burden you would otherwise have.
Doing your research and leveraging your college’s housing resources can help you make a more informed decision about where to live, and how to pay for it, while you’re in college.